WASHINGTON – President Barack Obama has called for an overhaul of the US tax code for individuals and businesses and said he wants to raise an additional $1 trillion through tax increases over the next decade.
Mr Obama, in a speech yesterday, urged Congress to raise money by eliminating so-called tax expenditures, which would generate revenue that could be used to reduce tax rates and also increase the government’s take from the economy.
He did not provide details about which tax breaks he would curtail or eliminate. The largest US tax expenditures include the deductions for mortgage interest and charitable contributions and the exclusion for employer-provided health insurance.
Tax increases would make up about $1 trillion of the $4 trillion in additional deficit reduction Mr Obama is seeking over the next decade. They would come on top of the tax increases proposed in the budget he released on February 14th, which included limits on itemised deductions and higher rates for taxpayers in the top two tax brackets.
The blueprint he announced is similar to one used by the fiscal commission Mr Obama appointed last year. “I believe reform should protect the middle class, promote economic growth, and build on the fiscal commission’s model of reducing tax expenditures so that there is enough savings to both lower rates and lower the deficit,” Mr Obama said in his remarks at George Washington University in the capital.
Until now, Mr Obama’s calls for a tax overhaul had focused on the corporate tax code and on allowing income tax rates for high earners to rise in 2013.
Under current law, all of the income tax cuts that were extended last year would revert to pre-2001 levels at the end of 2012. He reiterated his support for those policies yesterday. “I agreed to extend the tax cuts for the wealthiest Americans because it was the only way I could prevent a tax hike on middle-class Americans,” Mr Obama said.
“But we cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society. We can’t afford it. And I refuse to renew them again.”
Mr Obama’s support for revenue-raising tax changes puts him at odds with many congressional Republicans, who contend that all deficit reduction should be accomplished through spending cuts. – (Bloomberg)